With the recent mandate of PSD2, the regulation which requires open banking in the EU, financial institutions are now faced with how exactly to provide access to the third party processors (TPPs) who are now allowed to have access to consumer banking clients’ data. Financial institutions are debating whether to offer direct access to their systems for the required data set or APIs:
While the regulation as a whole came into force on January 13, the provisions surrounding the introduction of a third party interface have been delayed by discussions between the European Banking Authority and the European Commission over its content. These discussions have now concluded with a solution that should address the interests of all market participants.
In short, banks can establish a third party interface either by means of a dedicated interface – via APIs – or by allowing TPPs direct access through an enhanced webpage which shows only the PSD2-compliant parts. The API option has many advantages, and represents an important step forward in service provision, which could help generate innovative services that benefit customers, as well as the businesses involved. For this reason, industry participants would do well to utilise and exploit Open APIs as soon as they can.
Although APIs may have advantages as described in this article, they are not maintenance – free. As new data are required to be shared between banks and third parties, new APIs will need to be prepared. As new format standards are created for APIs, banks will need to be vigilant in bringing their APIs up to new standards.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
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